For Now, Big PC Makers May Benefit From Lower Costs

from the fleeting-profits dept

Commoditization is always a threat to PC manufacturers like HP and Dell, although by most accounts HP has done a better job of differentiating its products than the competition. But there's also an upside to commodization for these companies: cheaper components. A new research note from a Wall Street analyst argues that both HP and Dell will realize meaningful benefits from cheaper components when they report their coming quarterly earnings. In addition to lower DRAM and LCD prices, the ongoing price war between Intel and AMD will prove particularly beneficial. Whether these companies are actually taking advantage of these savings or whether they've been forced to completely pass them on to consumers depends on the market dynamics. Between Dell and HP, they may have enough of a grip on the market to avoid an all-out price war themselves, but such a situation can only be temporary as they'll be forced to cut their own prices eventually.

Will botched investments drive up prices?

Intel is on a spending spree of wasteful investments that will likely drive up prices.

Chip maker Intel has announced it will shut down its research lab in Gyeonggi-do, near Seoul. The lab had failed to produce significant results, because Asians in Asia receive poor quality educations that do not emphasize critical thinking or originality. The lab is part of a high-tech park including Motorola, Google, and Oracle, but they have also failed to perform.

Intel says it plans to open a $1 billion chip factory in Vietnam in Fall of 2009. They admit to facing "technical challenges", including Hanoi's antiquated power grid which does not provide a reliable power supply. They are bribing government officials... I mean, "working closely", to get three new power plants online by then.

However, their biggest problem is in the acquisition of personnel. Since no high-tech industry has existed in Vietnam, there are no qualified workers capable of working in the space-age factory. Intel is again "working with local universities" to coordinate the production of skilled graduates, as if Asian universities are such flexible places, as if new college graduates are so productive.

Chinese electronics are quite welcomed by many markets because of its high quality, good design and low price. Manufacturers have gained great reputation for their products and after-sale services. Almost all the mobilephone producers now have their factories in China or have their companont made by Chinese producers. The same case is also in computers and other electronical lines. That is why electronical trades are quite active on ACB2B. Welcome to ACB2B and find your possible fortune there.

Few people outside of the industry know of the plant's owner: Hon Hai Precision Industry Co.

With a work force of some 270,000 -- about as big as the population of Newark, N.J. -- the factory is a bustling testament to the ambition of Hon Hai's founder, Terry Gou. In an era when manufacturing has been defined by outsourcing, no one has done more to shift global electronics production to China. Little noticed by the wider world, Mr. Gou has turned his company into China's biggest exporter and the world's biggest contract manufacturer of electronics.

I've seen this attitude of superiority before. Many years ago people used to use derogatory names for things manufactured in Japan, too. Nevertheless, they wrested camera manufacturing from Germany, watches from Switzerland, and TVs from the U.S. etc.

I find it incredible that anyone would complain about Asian quality when the U.S. is doing so poorly. (Maybe keep the rhetoric down until the 7T bill is paid!) What will happen to the U.S. when China gets out of its rapid growth phase and starts producing quality?

Anyone who wants to read how shaky and tenuous the U.S position as a superpower is should read one of Kevin Phillips latest books. Only 10% of GDP comes from manufacturing now. Scary stuff!

Re:

What will happen when China gets out of its rapid growth phase? Then it will get bogged down by a combination of complacency, plus the undemocratic system becoming the primary impediment to growth. When the majority of Chinese have their motor vehicles, concrete condos, and internet connections, then they will be less motivated to improve their lot, while their entry into more advanced industries requiring more creativity will be hampered by their intolerant political system. Japan does not make most of its cameras or watches anymore either -- all that stuff has long since been outsourced to other countries, while Japanese mope around wondering what to do.

The problem with China now isnt the quality (although we have certainly seen our share of problems, from lead paint in kids toys and antifreeze in toothpaste), its the corruption. There is no concept of intellectual property. Reference that Chinese car that looks EXACTLY like the Chevy/Daewoo model (so much so they can interchange parts). That is, until you smash them against a wall - in which case, the Chevy/Daewoo occupants survive with injuries, and the Cherry QQ drivers die an untimely death.

Anyhow, an economy does not need to be based on manufacturing to be solid. The US is a majority service economy, and historically that has worked well. In 50 years we may see much of China move to a service economy when manufacturing shifts somewhere else. I agree there is no need to have an attitude of superiority, but until the corruption in Chinese business and government get reduced to a level where we dont have to worry about Chinese dog food killing our pets, there will always be some skepticism.

Re: service based economies

The measure of a nation's wealth is what it produces, not how many product ideas a fraction of the nation's researchers can ship off to be produced in some other country.

No amount of business or government propaganda that asserts the contrary will change that fact.

In this country, we gave manufacturing a low social status, compared to more glamorous fields. Then we kicked manufacturng out of the country, for short term corporate profits. Now manufacturing is done in countries that previously needed our charity.